October 4, 2023

FCA imposes £6.4 million AML penalty on brokerage services company

The UK Financial Conduct Authority has imposed a £6,470,600 penalty on ADM Investor Services International Limited, an international clearing and brokerage services company based in the London, pursuant to section 206 of the Financial Services and Markets Act 2000, for failing to comply with anti-money laundering requirements.

As noted by the FCA, ADM’s customers include Politically Exposed Persons and individuals in diverse geographical locations, placing the company at high risk for money laundering.  Following a periodic assessment in February and March of 2014, the FCA notified ADM that it had identified weaknesses in the company’s risk management framework, compliance monitoring, and client risk assessment protocols – in particular, the company had no formal process to classify clients according to their money laundering or terrorist financing risk.  As a result of these findings, ADM was required to complete a risk mitigation program, including the implementation of a client risk-rating procedure upon onboarding, the development of a compliance monitoring plan, and the institution of a comprehensive risk management framework to identify policies and procedures for managing AML risk.

Two years later, during a visit to ADM in 2016, the FCA found that some of the corrective measures undertaken by the company after the 2014 assessment were ineffective.  The FCA also identified new failings, including inadequate on-going monitoring, limited periodic customer reviews, outdated policies that had not been updated in accordance with new legislation, limited customer risk assessments, and the absence of a firm-wide money laundering risk assessment.

In addition to requiring ADM to revise its deficient client risk assessment, the FCA asked the company to enter into a Voluntary Requirement in order to limit AML exposure pending improvements to the company’s systems and controls.  Under the Voluntary Requirements, ADM was prohibited from entering into new business with politically exposed persons, customers in high-risk countries, and customers who were deemed to be high risk pursuant to ADM’s revised client risk assessment matrix.  For certain other clients, an enhanced due diligence review was required.

The deficiencies identified by the FCA, and ADM’s failure to conduct adequate remediation following the 2014 assessment, were deemed to be breaches of Principle 3 of the FCA’s Principles for Business, which mandates the adoption of suitable risk-based anti-money laundering systems and controls.  ADM agreed to accept the FCA’s findings, and following the lifting of the FCA’s requirements in 2018, requested that the FCA’s Regulatory Decisions Committee assess an appropriate penalty.  Whilst acknowledging that ADM has since taken remedial action to address these historical compliance weaknesses, the FCA assessed a penalty of £6,470,600 against the company.  The penalty amount reflects a 30% settlement discount, which reduced the penalty from £9,243,600. |

FCA press release | Final notice